European stocks fall on valuation fears

Laura Slattery

European stocks fell for a second day at the end of a volatile week, as investors speculated that equity gains have raced ahead of the outlook on corporate earnings. Concerns lingered that valuations on technology stocks and some cyclical consumer stocks are too high, prompting a sell-off.

Dublin

The Iseq index slipped 1.3 per cent, as major stocks fell back. Building materials group CRH closed down 1.8 per cent at €20.91, as construction-related stocks declined. Bank of Ireland lost ground in tandem with a poor day for bank stocks across Europe, finishing down more than 1 per cent at 28 cent.

Ryanair and Aer Lingus also followed a pattern of losses for airline stocks, as Heathrow Airport Holdings announced poor passenger numbers for the month of March. Ryanair closed at €7.53, down 2.9 per cent, while Aer Lingus edged down 0.6 per cent to €1.64.

Drinks group C&C was also among the fallers, finishing down 2.4 per cent at €4.45, while food group Kerry lost 1 per cent, closing at €54.08, as Swiss company Givaudan missed analysts' forecasts on flavouring products.

London

UK stocks declined, with the FTSE 100 index of blue-chip shares retreating 1.2 per cent by the close of trading in London. This extended the benchmark gauge’s weekly drop to 2 per cent, amid a sell-off in technology companies that saw Arm Holdings, which designs chips for Apple’s iPhone and iPad, dropping 4.5 per cent to 958.5 pence.

Bank stocks also fell. Royal Bank of Scotland dropped 0.9 per cent to 306 pence, while Barclays declined 1.5 per cent to 236.1 pence, after JPMorgan Chase posted worse-than-expected first-quarter profit.

International Consolidated Airlines Group fell 5.3 per cent to 392.1 pence after Heathrow Airport Holdings said it handled 2.8 per cent fewer passengers in March than the same month a year earlier.

Firstgroup dropped 2.9 per cent to 125.4 pence after analysts at Nomura Holdings downgraded the bus-and-rail operator to neutral from buy, saying that increased costs and poor weather in the US in the first quarter will hurt earnings.

Builders Taylor Wimpey, Persimmon and Barratt Developments each lost at least 2 per cent as UK construction data missed estimates.

Europe

National benchmark indexes tumbled in all western-European markets, with France’s CAC 40 dropping 1.1 per cent and Germany’s Dax losing 1.5 per cent. A gauge of technology stocks posted the worst performance among the 19 industry groups in the Stoxx 600.

Thales fell 3.7 per cent to €46.09. Analysts at JPMorgan Chase downgraded its recommendation on the French defence-electronics maker’s stock to “neutral” from “overweight”.

Mediaset Espana, trading after an hour’s suspension in Madrid, lost 5.1 per cent to €7.97, after Credit Suisse sold a 3.7 per cent stake in the company for €8.08 a share on behalf of Spanish media conglomerate Prisa, which now owns 13.7 per cent of Mediaset Espana.

Givaudan declined 2.5 per cent to 1,370 Swiss francs. Comparable sales at its flavour division rose 5.8 per cent in the first quarter, the world’s biggest maker of flavouring products said. This performance missed analysts’ forecasts.

Salzgitter advanced 1.2 per cent to €30.81 after Citigroup upgraded the shares to buy from neutral, saying the German steelmaker will benefit from any increase in construction-related demand in Europe.

NEW YORK

Stocks fell as technology shares extended losses and JPMorgan Chase and Co. slid on disappointing earnings, leaving the S&P 500 poised for its biggest weekly loss since January.

JPMorgan lost 2.9 per cent to $55.72 as profit fell 19 per cent on lower fixed-income trading and mortgage revenue. However, Wells Fargo rose 1 per cent to $48.20. The most profitable US bank in 2013 posted a 14 per cent rise in earnings as fewer customers missed loan payments.

Micron Technology, Broadcom and Teradata lost more than 2 per cent as technology shares paced declines in the market after tumbling the most since 2012 yesterday.

About 54 companies in the S&P 500 are scheduled to report results next week, including Coca-Cola, Goldman Sachs, Yahoo!, Google and General Electric.

(Additional reporting: Bloomberg)